Much to the dismay of taxi drivers, hotel owners and retailers around the world, innovation has taken on an entirely different shape. Companies like Uber, Airbnb and Etsy are changing the face of the traditional marketplace.
The sharing economy, a relatively new model to the way we do business, has introduced a host of peer-to-peer businesses fighting for their piece of this freshly baked e-commerce pie.
But as with any idea that reinvents the wheel, the sharing economy has its critics. But that hasn’t stopped its rapid rise in popularity.
The History of the Sharing Economy
Let’s wind the clock back a casual two thousand centuries to the genesis of the Moorish bazaar. Located on trade routes, bazaars were the precursor to the modern day marketplace. Vendors from all over could sell their exotic goods to buyers who would otherwise not have access to them. There were no set prices, regulated business models or promo codes: just people haggling for what they thought was a fair deal.
Now, we hop back in our DeLorean, kick it to 88mph and blast forward to San Jose, California, 1995.
Enter, Pierre Omidyar: the dude who founded eBay. Omidyar took the concept of the bazaar and, thanks to the Internet, turned it into an always-on, worldwide platform. Anxious kids could pester their parents into buying them 1st edition Pokémon cards straight from Tokyo. The guy who acquired Tiger Woods’ left sock from the ’97 Masters could sell it to some obsessive collector across the globe.
Omidyar opened the e-commerce floodgates, making way for sites like Amazon and Craigslist which helped us feel comfortable doing business with complete strangers.
Uber couldn’t exist without the ability to track your location using a portable GPS in your pocket. Airbnb couldn’t function without immediate communication between its hosts and users. The sharing economy owes its entire existence to exponential technological growth over the past few decades.
And what about Facebook? Something that started as a way for college students to stay connected is now our personal background check service for anyone we don’t know. All the essential steps of starting a business relationship can now be done while sitting at your kitchen counter.
Redefining the Marketplace
We live in a world governed by efficiency. The technology that has influenced this new sector of the economy has lowered transaction costs, allowing the purchasing of goods and services to happen on a much larger scale.
Today’s sharing-based businesses are also inherently more scalable than traditional businesses. As the physical products of the sharing economy — cars, rooms — are owned by the people using the services, the costs of running or expanding them are minimal. In other words, once you’ve built the Uber app, you only have to pay for additional staff to support customers and drivers (in addition to small other costs, such as continued app development).
This zero marginal cost phenomenon, a byproduct of the Internet Age, has already begun to cripple other industries, like music, film and media publishing but has fueled the fire for businesses following a collaborative model.
What Does This Mean for Me?
The sharing economy has the potential to completely alter the way we conduct business, and as the fresh-faced recruits of the working world, it would behoove you to understand the implications of this shift.
A report conducted by Jonathan Hall, Head of Policy Research at Uber Technologies, and Alan Krueger, Professor of Economics and Public Affairs at Princeton University, shows that the number of driver-partners for Uber has jumped from around 10,000 in 2013 to over 150,000 at the start of 2015.
At some point, the service will be as ubiquitous as taxicabs were a few years ago but the number of users looking for a ride will remain static. Though a large number of people may still look to become drivers, they’ll have to fight over fares, which makes the prospect of being an Uber driver for the long-term a bit less rosy.
Workers in the sharing economy must also cope with minimal job security and limited (if any) benefits. For example, Uber drivers are “independent contractors,” meaning they don’t receive any of the benefits typically granted to a full-time, salaried position.
Surprisingly, Hall and Krueger’s study showed that, of the driver-partners they interviewed, 73 percent would still prefer working for a job where they choose their own hours, and 35 percent stated that if Uber no longer existed in their area they would look for another ride-sharing service to work for before looking for a job in a different industry.
Stability is no longer intrinsically linked with long-term employment. Rather, it can be found by taking part in a collaborative economic structure based on the freedom to choose. The most sought-after positions will be those that, while riskier, provide control over our schedule and client base.
As more companies scale back on worker benefits and retirement plans, making money in the gig economy becomes a fairly attractive proposition. According to a 2014 survey conducted by the Society for Human Resource Management, less than a quarter of employers are continuing to provide a traditional pension plan and, by another measure, only 50 percent of employees are “very satisfied” with the benefits that they receive at work.
You could work part-time, spend your free hours driving for Lyft and still make the same amount of money at that full-time gig. Yes, you potentially forfeit some benefits, but think of everything you could accomplish in the time not spent behind a desk. It’s possible to think of sharing economy work as an investment, not one that will pay off monetarily, but one you will see immediate returns on.
With data like that, the sharing economy looks more and more promising. In fact, a workforce that shifts its focus towards a freelance, entrepreneurial, I’m-my-own-boss style of business could be exactly what the doctor ordered.
Interested in learning more about the sharing economy? Check out the infographic below or, if you live in Florida, check out our event on Saturday, February 28, “How the Sharing Economy is Changing the World.”